EU tax scandal highlights need for redistribution

EU tax scandal highlights need for redistribution

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Marisa Matias writes that the ‘LuxLeaks’ scandal is a common occurence and that EU tax systems should focus on their ‘main task’ of redistribution.

 

Setting out the case for a redistributive tax policy is crucial. Most people saw ‘Lux Leaks’ as an exceptional situation, but the truth is that, unfortunately, it is an extremely common occurrence.

Political will is at stake, both at national and European level, but in order to be fair to its citizens, Europe has no other option – each year, tax avoidance and tax evasion result in a loss of €1 trillion.

Tackling fraud and tax evasion is undoubtedly about social justice. The current system is unfair – the burden of tax policy has been shifting over the last few years, with consumers and workers now bearing the brunt of it and big corporations increasingly being relieved of their duties.

That is why we need a new, socially equitable and progressive taxation policy and to re-centre it on its main task: redistribution. Wealth, high incomes and net profits, as well the existence of offshore companies and tax havens in the EU are part of the problem.

Tax policy is one of the weakest links in the EU and the ‘LuxLeaks’ scandal is just one example of how a lack of harmonisation has fostered a culture of organised tax dumping.

The current situation has reduced capital income’s contribution to public accounts, and the majority of the population is now overwhelmed as it is forced to pay for these privileges. At the same time, the redistributive character of tax systems has been undermined, both by the growing reliance on indirect taxation and by the changes in direct income taxation.

Organising a debate on tax policy like the one parliament’s GUE/NGL group set up recently is a way of trying to make tax policy a driver of equality, instead of inequality.

Furthermore, we need real transparency when it comes to public access to information exchanges on tax rulings and country-by-country reporting. We also need a protection system for whistleblowers who have the courage to shine a light on information that should be public knowledge.

The least we can say about current tax policy is that it is inefficient and unfair. In the past few years since the onset of the crisis, there have been huge amounts of tax competition and a steep drop in tax revenues from big companies.

Consumption and labour are submitted to high levels of tax, but the same can hardly be said for large corporations. This has had a devastating effect on peripheral eurozone countries. For example, 19 of Portugal’s biggest firms have set up headquarters in Luxembourg and the Netherlands to avoid paying high taxes.

The European commission recently came out with a new set of proposals, but the package didn’t feature anything new. The measures it proposes have existed since 1977, but the commission has so far failed to implement them.

As for so-called transparency and exchange of information, these were kept to a minimum. This information needs to be made public. If we want to tackle this problem, the window we need to open wide is called tax justice.

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